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by Trent M. Johnson, Senior Counsel at Foley & Lardner LLP

A statute just enacted in New Hampshire will subject tractors, farm implements, construction, industrial, and forestry equipment, and even lawn and garden equipment to the detailed regulatory regime applying to car dealerships.

On June 25, 2013, New Hampshire Governor Maggie Hassan signed into law State Senate Bill 126, making a series of changes to New Hampshire’s motor vehicle dealer law intended to give “motor vehicle dealers” additional leverage in their relationships with manufacturers. The most radical change made by SB 126, one unprecedented in the United States, is a dramatic expansion of the term “motor vehicle” to include a vast array of equipment that is not used for transportation on roads or highways — indeed, apparently, equipment that in many cases does not even have a motor. This new definition of “motor vehicle” reads, in relevant part:

Motor vehicle shall include equipment… “æÃæü¤ÇéÎåÔÂÌì” means farm and utility tractors, forestry equipment, industrial equipment, construction equipment, farm implements, farm machinery, yard and garden equipment attachments, accessories and repair parts.

See RSA 357-C:1 (as amended) (emphasis supplied). When SB 126 takes effect on September 23, 2013, manufacturers of tractors, forklifts, bulldozers, snow blowers and conceivably even lawn mowers and wheel barrows will be covered by the myriad strictures of New Hampshire’s motor vehicle dealer law, RSA 357-C, which up to now has applied only to companies like Ford, General Motors, and Toyota. At the same time, SB 126 will repeal RSA 347-A, New Hampshire’s long-standing law regulating equipment dealerships.

For Association members and other equipment manufacturers, the effects of SB 126 cannot be overstated. Unless constitutional objections based on impairment of the obligations of contracts are sustained, common terms and provisions of current equipment dealer contracts that are inconsistent with RSA 357-C, as amended by SB 126, are likely to be held void as contrary to public policy. This includes some contractual provisions that are all but universal. For example, under RSA 357-C:3, III(k), (l) equipment manufacturers will not be permitted to compete with dealers, either directly or indirectly through affiliates, except in very limited circumstances. Thus, equipment manufacturers who had retained the right to sell direct, or appoint new dealers in a relevant market area, will no longer have such a right. Further complications abound, including (among many others):

• Termination Limited to Good Cause as Determined by the Motor Vehicle Industry Board: An equipment manufacturer will be precluded from terminating or failing to renew an equipment dealer’s contract — or change a dealer’s relevant market area — unless the New Hampshire Motor Vehicle Industry Board has determined “good cause” to do so exists. Securing such a determination involves a convoluted administrative process. RSA 357-C:7, I(d)(1).
• Complicated Warranty Reimbursement Regime: RSA 357-C:5, II sets forth a lengthy and complicated warranty reimbursement regime, much different than the simple and straightforward requirements under the current equipment dealer law. Regardless of the terms of their contracts with dealers, or the costs, equipment manufacturers will be required to adhere to this new reimbursement regime.
• Requirements to Arbitrate or Waive Jury Trials Unenforceable: Contractual provisions that require arbitration and waiver of jury trials, rather common cost-saving measures, will be unenforceable under RSA 357-C:3, III(p). (This may be preempted by the Federal Arbitration Act.)

SB 126, in short, represents a sea change in the regulation of relationships between equipment manufacturers and dealers.

For companies that manufacture the kinds of motor vehicles that have speedometers and seat belts (i.e., actual motor vehicles), the effects of SB 126 will not be quite as profound, as these traditional motor vehicle manufacturers have already had to deal with the requirements mentioned above. However, some new requirements will be onerous for them as well. For example, SB 126 requires motor vehicle manufacturers to disclose certain types of performance-related “documentation” to a dealer upon request on a yearly basis, limits mandatory facility upgrades to every 15 years, permits a dealer to purchase goods or services from non-designated vendors (a provision intended to spur dealers to “buy local”), and requires a manufacturer to pay the retail rate for warranty work. See RSA 357-C:3-a, C:3, III(w), V(d), C:5, (b)(1) (as amended).

As obvious, the æÃæü¤ÇéÎåÔÂÌì staunchly opposed the bill, believing it to be unconstitutional, preempted by federal law, and likely to increase, substantially, costs to New Hampshire businesses and consumers. While the Association is considering legislation to try to prevent similar protectionist moves by other States, members who are potentially affected by the law (i.e. have dealers or distributor who serve the New Hampshire market) are advised not to delay in taking any necessary action. Again, the New Hampshire law will go into effect on September 23, 2013.

New Hampshire SB 126, as well as the effects of new legislation in Maine and Texas, will be discussed at FEMA’s upcoming fall convention, October 22-25 in Indianapolis.

Editor’s Note: As you may know, last April, after years of dedicated and skillful service as outside counsel to this Association, Brian McGrath retired from the private practice of law. Before retiring, McGrath asked Trent Johnson to continue his work as counsel to this Association, and to ensure that members continue to enjoy the highest level of service with respect to distribution legal issues.

As the Association’s new outside counsel for distribution legal issues, Johnson will strive to provide you with the same kind of efficient and effective service that McGrath gave.

He will be attending this year’s Fall Convention in Indianapolis, presenting on dealer/distributor termination, and some of the legal and practical ramifications of recent legislation, such as the New Hampshire legislation addressed above.

Association members are entitled to 30-minutes free, per issue of legal counsel with Johnson. For more information contact Trent Johnson at 414.319.7303 or by email at .